The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Could there be a message for the likes of Unilever here?
On this board we of course are largely the converted, we believe in the product and the company. The market is not, so of course it takes a knock. One thing I like here is the massive statement of confidence here by the management in their product, even in the face of all the other green formulations and products that they are familiar with and that are seeking to break into this market.
Thank DD - you could be right here - let's hope so.
The only additional question I have here is, why would JS make this specific revelation NOW, when he could have simply included it in the 'Outlook for 2024', when the Final results for 2023 are announced about this time of year?
Hi JD
Blended Gross Profit Margin up 3.2% to 28%
This was due mainly to production ramp up and pricing increases to customers in the late part of 2022
Performance Ingredients – GPM 34%
Formulation Ingredients – GPM 10%
So even less of an impact ?
Looks like we have taken delivery of a further 40 metric tonnes of raw materials, will post details when confirmed, with complete BOL and up to date shipping information.
ATB
AJP
AJP - I also expect a compromise to be reached.
Just my view, but this is a stand off situation, but because it's material to ITX, they have to release an RNS notifying shareholders.
The cost of reformulation and testing of that will be a real issue for the detergent manufacturer. The big boys frequently try and squeeze their supply chain and sometimes they bite back. I see that as this sort of situation and expect a resolution as it would be beneficial to both sides. Ultimately though we should end up with better terms and it draws a line in the sand and a warning to others that ITX doesn't do business for nothing.
Time will tell if my hypothesis is right but my gut instinct is it is
The drop in revenue for 2024 (cf. 2023) is anything between $1.4m and $1.9m. Even if the lost GP is say, at a paltry 15%, that's a bottom line hit of $200k.
It would be informative to know whether there are any associated cost-savings accompanying the loss of this customer, or is it a $200k hole to be funded out our $10m money chest.
Does not look like todays news has has any effect on our staffing requirements, which should tell us that it is still full steam ahead, we do not want to be a one trick pony?
https://itaconix.bamboohr.com/careers
4 positions still require filling
ATB
AJP
JD I didn’t misunderstand your point at all as my comment wasn’t replying to yours, it was my opinion
I do get your point though but hopefully this can be sorted moving forward
Wacca - you misunderstood my comment.
Of course JS has done the right thing here (walking away from an onerous contract )
My concern was telling shareholders that, once our formulation is in, it’s difficult to remove, when all the time, ITX is having a problem retaining a long-established customer on low profit margins.
Yes, of course JS has done the right thing in walking away IMHO, but don’t talk about ‘stick ability’, when it simply isn’t always deliverable.
That all I’m saying..
I say good on John and the team with not being pressured into cutting the price, you do it for one then every customer wants it and they then work harder for less money. What we have here is very unique and I think the customer has chanced it, ITX has stood firm and the company will grow to regret it. In business there are tons of customers out there and you don’t win/keep them all, total over reaction to saying to a customer…..sorry,you don’t meet our terms now beat it
I think this lesson should help to create less euphoria around the possibilities of onboarding clients such as Unilever - what would happen if ITX were too reliant on one very large client? We have to assume John and his team know what they are doing - doubtless as in any negotiations there would be some scope for give and take, but if a larger client tries to flex their muscles too much, it cannot be good for the relationship going forward, unless a compromise can be reached.
We should not maintain 'unhealthy profit' sticky customer relationships thats the point here. We have better fish to land in a large ocean now so a bit of spring cleaning of our portfolio may have been needed to optimize future opps/profit delivery and reduce loss making contracts!
Hi JD
Think as you say there needs to be further clarification and next week would be as good a time as any to get this?
Is this a stand-off situation?
As has been said by John that once you are formulated in it is very difficult to get formulated out.
I would guess that whichever customer we are talking about would now have to go down the road of a reformulation, rebranding and I guess not being able to claim the advantages associated with using ITX ingredients, a very costly exercise I would have thought, with no guarantee that the new product would be successfully adopted by the public?
I am sure a compromise will be trying to be sought
ATB
AJP
@Smartinvestment, a couple of weeks ago you were speculating that a massive deal was being struck with Unilever.
What has caused you to change your mind on that?
Agree with you Smart.
Can’t see the point of making that statement, when all along in the background ITX was having trouble renewing a contract with a customer providing a major revenue stream.
Makes you wonder how naive his negotiating skills really are!
Always said we shouldn’t be busy fools!
In JS's last presentation he emphasised that once our formulation in included in a product, it is hard to get it removed and ‘orders keep rolling in’.
Well, one customer appears to be challenging that concept. So the fact that this customer is still going to use our formulation, but in lower volumes probably requires clarification.
GLA
So it turns out that the frequently trotted out John Shaw claim about sticky recurring revenues are actually not so sticky after all.
I have lost my confidence in this company and I would urge others to take a cold hard look at the performance of this share before ploughing in more of their hard earned money.
"I just topped up £20k"
Easy money for you, I suspect! The RNS certainly doesn't confirm the financial impact that the SP has just shown! Was tempted to do the same as you, but I topped up recently unfortunately.
The market might see this news as a problem, but it absolutely comes from a position of confidence and strength.
The question, is have they walked away, we are very quick here to jump onto the negatives, but would it make sense to be supplying this customer and not making anything at all , what would be your reaction to that? very similar I would hazard a guess.
As has been said and I agree, John would not have taken this step to defend the margin unless he has something coming out soon to cover surpass this revenue blip
Have we forgotten the potential of the big boys (Unilever etc), who we have broken into and the further revenue streams of Leather products, paint and superabsorbents.
All is not doom and gloom and that there is a bright future for ITX, we cannot be held to ransom by one customer, think there is more to come from this and maybe it will take it being out in the open to reach a resolve?
Long term holders have seen this all before
ATB
AJP
This is what the new CEO of RollsRoyce is doing and this lost them some big business with Air Emirates
However RR know they have some of the best engines around have taken this position because their product cannot be matched elsewhere.
I know itx are not RR but John knows that to re formulate without itx ingredients is costly and in the long run a backwards step so he's just calling customers bluff right now.
I just topped up £20k
'Do business'... at any cost? Anyone can be a busy fool. What's the point of doing business for no, or little profit?
It is alarming, but at the same time can be taken to demonstrate confidence and protecting margins.
Is this really the way to do business? To lose your biggest customer at this stage is not clever! Whilst others might be impressed I am not! There is always room to negotiate, to walk away from a very important customer is ludicrous!
My take here is that John wouldn't have let this contract go if he didn't have a better revenue stream advanced in the pipeline for 2024.
Look out for more positive updates in the coming months
Unfortunately this is the way with Itaconix. Bottom line - The company has failed to renegotiate with its largest customer.
This is a disaster and the share price for this year is screwed and I expect it to continue to fall lower.
Itaconix history seems to be that every time we think we are making progress we suffer a huge setback.
At this stage in the company’s lifecycle it’s hard to comprehend walking away from a large contract in this way. Nothing suggests that it was loss-making and there is no capacity challenge, so what’s the upside of this in the long-term? Two steps forward, one step back I suppose.
Clearly the market was not going to like it but I thought it showed real balls and confidence to not just roll over.